Twitter stock edged upward by as much as 3% in afternoon trading today after the rumor of an acquisition by Google resurfaced. Of course Twitter shares didn’t rise all that much simply because this rumor has popped up about once a year for the last five to six years.
By now, Wall Street has probably tired of the rumor, and most investors probably have taken it with a grain of salt. But is it for real this time? Probably not.
Michael Mauboussin: Here’s what active managers can do
The debate over active versus passive management continues as trends show the ongoing shift from active into passive funds. Q2 2020 hedge fund letters, conferences and more At the Morningstar Investment Conference, Michael Mauboussin of Counterpoint Global argued that the rise of index funds has made it more difficult to be an active manager. Drawing Read More
Would Google really buy Twitter?
SunTrust Robinson Managing Director Robert Peck addressed this latest round of speculations on CNBC’s Halftime Report. He pointed out that Google management is probably aware that Twitter “is the best real-time search engine out there.” As a result, he seems to think it’s a combination that makes sense.
Before Twitter went public, the speculated valuations for the company ranged from $10 billion to $20 billion. The micro-blogging platform’s market capitalization is now about $24.33 billion, although Peck thinks it would take more than $40 billion to get the deal done.
Could Google acquire Twitter?
He said this is possible for Google, which has about $60 billion in cash or $45 billion excluding taxes. However, he added that it would be difficult because it would take such a huge bite out of the search giant’s cash, especially at Twitter’s current share price levels.
Peck also said he thinks Twitter management would “probably want a pretty big number” from Google because the company’s share price has been near its lows and they think they can execute well and fix the problems, so they think Twitter’s stock price will go up.
Should Google buy Twitter?
CNBC Business News’ John Fortt pointed out that if this deal really did happen, it would be one of the biggest tech acquisitions ever. Of course Google has gobbled up big technology companies before, as it acquired Motorola, although the result wasn’t great and now Lenovo is buying Motorola from Google.
Also Twitter doesn’t have as many “hard assets” like patents and research facilities as Motorola did when Google bought it. As a result, Fortt said a move like this would be very risky for Google and “would set a whole new tone” in the tech sector.
In a post on 24/7 Wall St., Paul Ausick also suggests that it wouldn’t be a good move for Google to buy Twitter. He said if Twitter could help Google at all, any help it might offer would probably be “too expensive.” The micro-blogging platform’s current revenues wouldn’t even move the needle on Google’s overall revenue, and Twitter’s relatively small number of users wouldn’t be much of a help to the search giant either. Twitter, on the other hand though, could massively benefit from having its platform rolled out to all of Google’s services.